So anyone really surprised that we're due for a recession?

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Originally posted by chinamon not true. i say "ugh" but i am a tranny.

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Originally posted by kotsy lol colour me retarded

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Originally posted by VDub Isn't it better to spend and keep the economy healthy??? And speaking of investments, wouldn't it be really good to buy property in the states now??? In Texas, you can get a mini mansion for 150...

The problem with encouraging spending is that American (and to a smaller extent Canadian) spending has been sustained by cheap credit. Interest rates have been retardedly low for years. Credit has been given out freely, debt racked up by consumers and mortgages given to unworthy borrowers. We're now at the point where a/ credit is not available from banks like it used to be and b/ homeowners owe more on their mortgage than their home is worth making them an even shittier borrower. Net net, whether it's cash or credit, there's very little money left to spend.

If you want US real estate, you have to be a pristine borrower or be paying cash.

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Originally posted by Yohan So anyone really surprised that we're due for a recession?

a recession is one thing...this has the makings of something much larger.

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Last edited by Moral Hazard on Apr-26-2011 at 07:48

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Originally posted by The Ear Believe me, I'd love to fix this. But equity market turmoil is great for my company's asset class. But before you start asking me to get into it, please refer to my post here: Link, & understand why I can't discuss certain things in a public forum, but can in a private context.

Ok so PM me...

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Originally posted by chinamon chinamon is INCH MOAN. LOL so fitting.

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Originally posted by The Ear Perhaps people should have realized that this was coming a good while back, b/c there has been every indication that this was coming for over the past 1.5yrs.

1.5 years? Try 15 years. For over a decade, banks have been coerced by the government into taking on more and more bad loans (just as one example, by being forbidden to actually look at income and credit history as a requirement!). It's no wonder this happened.

A government bailout would be the worst possible thing for this situation. Yes, the stock market is going to tank if really big companies fail. But these companies must fail if they're not being run well enough to succeed. Propping them up only gives them the opportunity to make bigger, costlier mistakes, with less accountability, costing taxpayers trillions and expanding government control into the private sector even more.

You leave them to the dogs, there will be short-term chaos, but the economy will recover. Always does, always has. Government bailouts will only make the problem worse in the long haul.

Also, what is up with this:

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Originally posted by VDub That idiot Bush is bringing down the strongest country in the world....

If you're going to call people "fucking stupid", don't you think you might have taken into account the fact that Democrats have to vote for this too and that the Democrats presently control both houses, so as not to look stupid yourself? This isn't up to the Executive branch, it's up to the House and the Senate.

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I still think there's going to be a bailout.

Either the US crashes and burns without one now, or a bailout happens and the US accelerates its decline in the rankings of the world's most powerful economies.

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Originally posted by DigiNut If you're going to call people "fucking stupid", don't you think you might have taken into account the fact that Democrats have to vote for this too and that the Democrats presently control both houses, so as not to look stupid yourself? This isn't up to the Executive branch, it's up to the House and the Senate.

I wasn't talking about just this financial situation...

He's screwing things up in every direction...

And they're ALL stupid...

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Originally posted by chinamon chinamon is INCH MOAN. LOL so fitting.

As an aside, I can't believe RIMM is at SIXTY FIVE bucks. Holy shiite.

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Originally posted by VDub He's screwing things up in every direction...

No doubt, but not in the way that you think. Only Canadians and Euroweenies still whine about Iraq. That's money well-spent right now. The problem is that under Bush, the U.S. has seen the largest nationalization of private enterprise in recent history. That, coupled with absurd regulations killing the financial sector, is why the U.S. economy is tanking.

Let it tank. It will recover, and I'll be right there to collect when it does. I'll be buying up some nice stock once I'm confident it's at or near rock bottom.

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My party schedule:
2009-02-21 - DJ Attention @ I'm So Popular
2009-06-18 - DJ Annoying @ People Need To Know Where I'll Be
2012-11-32 - DJ Insufferable ɸ Or At Least the Stalkers I Complain About
2048-06-66 - Spastic & Whocares ¶ Although I'm Actually Flattered
9999-45-81 - Tweaker Gimp ☼ I Probably Won't Even Go To This But I Have To Make Sure I Fill Up All The Available Space Here

oooh, maybe the US economy will be on intervention tonight.

Good article in the Globe and Mail today discussing the looming credit card debt problem that really hasn't even started to come to light - yet.

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JOHN PARTRIDGE

Globe and Mail Update

September 29, 2008 at 4:51 PM EDT

A hurricane of bad credit card debt will start crashing ashore in the United States in the first quarter of next year, even as the mortgage crisis continues, analysts at New York research firm Innovest Strategic Value Advisors warned Monday.

“A combination of a 10-year steady drip of deteriorating personal finances and a tidal wave . . . brought on by the mortgage and credit crisis leads us to believe that credit cards are going to implode in the near term,” Gregory Larkin, Innovest's senior banking analysts said during an online seminar on the topic.

So far, credit-card “charge-offs” – debts declared irrecoverable by card issuers – have been “defying gravity,” with losses lower than in both 2001 and 2005, Mr. Larkin said.

But, historically, after a time lag, irrecoverable credit-card debt has followed mortgage charge-offs up or down, and U.S. mortgage charge-offs have rocketed up eight-fold since the last quarter of 2007.

“If history is any indicator, there should be an equivalent surge in credit-card charge-offs very soon,” he said. “We forecast first quarter credit-card charge-offs will be $18.6-billion (U.S.) and that the total 2009 charge-off bill will add up to $96-billion.”

Laura Nishikawa, Innovest's consumer finance analyst, said the credit card issuers that will be hurt least in the coming crunch will be those who had the “foresight” to improve their risk management performance during the bull market, even if they sacrificed some growth in the process.

“On the other hand, companies that have pursued aggressive portfolio growth and higher yields at the cost of prudent risk management will struggle to manage rising loan losses, which will definitely cut into earnings or even worse, as the last few weeks have shown,” Ms. Ishikawa said.

As well, companies that have a business model that is based on consumers actually repaying their credit-card loans, will be more resilient, although, “in reality, in the consumer finance business, we usually find the opposite of this,” she said.

She cited American Express Co., with its charge-card model, as a prime example, calling it “best in class,” in the business by this measure.

JPMorgan Chase also earned “best in class” among broad-based commercial banks by this and other yard-sticks, she said.

The flip side of the coin, is credit card issuers that base their business model on consumers not paying off their card balances. Higher balances mean higher revenues along with penalty fees and jumps to higher interest rates in the event of missed payments.

“In this model,” Ms. Nishikawa said, “delinquent borrowers become cash-flow generators, and at the extreme end, the goal becomes: ‘How do we get borrowers into delinquent status as soon as possible, in order to maximize returns?'”

Even in good times, this strategy is a “tight-rope walk” between high fees and high charge-offs. “But when the economy turns bad, as it has, this strategy clearly cannot be sustained.”

She cited Capital One Financial Corp. as “worst in class.”

In response to a query during an e-mail question and answer period, Ms. Nishikawa said that the three Canadian banks most active in U.S. consumer banking, Royal Bank of Canada, Toronto-Dominion Bank and Bank of Montreal, are still “very small players” in the U.S. card business.

Still, Innovest's preliminary findings, she said, suggest that the three banks' default rates on their U.S. credit card lending are “much lower” than the much larger issuers the firm has been concentrating on, although she emphasized that she is not “100 per cent confident” of this data.

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